US expats with IRS tax debt to lose passports

New IRS rules introduced earlier this year mean that Americans living overseas who have unresolved tax debts will no longer be allowed passport renewals.

According to the IRS website, certification of details of US citizens with seriously delinquent tax debts is now to be passed to the State Department. Those in this situation will not be able to renew their American passports and will be forced to return to the USA. Passports may also be revoked in more serious cases.

The rule will apply to expats with unpaid, legally enforceable federal tax debts of more than $50,000 including penalties and interest due, and on which debts a notice of federal tax lien has been issued. If all administrative remedies have been tried or a levy has been issued and unanswered, certification will also be passed to the State Department.

Exemptions include tax debt being regularly paid under an IRS instalment agreement and payment being made under an offer in compromise already accepted by the IRS. Settlement agreements with the Justice Department and those awaiting due process hearings will also be exempt, as will those suspended due to an innocent spouse relief request.

Before denying a passport, the State Department’s application will be held for 90 days in order to give time for the resolution of erroneous certification issues, full payment to be made or a payment method agreed with the IRS. Certification and passport withdrawal can be reversed after full payment is made or an agreed instalment plan is put in place.

A good number of US citizens living overseas may be affected by the new rules, especially as notifications by the IRS will be sent via automated letters to taxpayers’ last known addresses, presumably in the USA. Those who become aware by other means that they will be affected have no wait period allowing them to sort the matter out with the IRS. Tax evaders living in the US will simply have their passports revoked, meaning they cannot leave the country.

Tax websites are encouraging US expats who fear being caught in the trap to get themselves a second passport from countries including Domenica or St Lucia, although this is an expensive option perhaps costing more than the tax bills themselves. Other publications are suggesting the next Trump travel ban may be aimed at US expats with unpaid taxes! Fake news, it seems, isn’t just confined to media outlets disliked by the new president.